It’s fun to dream of owning a condo in Paris, a beach house in the south of Spain, or a villa in Tuscany. Many real estate shows have shown us the possibilities of owning property in another country. What they have not done, however (and travel restrictions during COVID-19 notwithstanding), is explain what happens to assets in another jurisdiction when you die.
It is critical for Canadians who have assets or are resident in certain European countries to be aware of what happens to their assets on death. It would be wrong to assume that other countries’ succession laws are the same as those in Canada.
Most civil law jurisdictions in the European Union (“EU”) operate under a forced heirship regime. In contrast, testamentary freedom - the autonomy to dispose of property on death as a person pleases - is a longstanding principle in Canadian jurisdictions.
Forced heirship laws often provide a mandatory distribution scheme among a person’s spouse and children and other family members. However, the European Succession Regulation (the “Regulation”), which came into effect on August 17, 2015, allows a person to opt out of these forced heirship rules in certain circumstances by making a choice of law of, for example, a Canadian jurisdiction through proper estate planning. The Regulation applies to all EU member states except Denmark and Ireland, which decided to opt out.
The Regulation provides rules to determine which country’s law will apply to a deceased person’s estate. Its application is limited to succession law (i.e. passing assets on death).
Generally, the law of the deceased’s “last habitual residence” will govern succession on death, with a few permitted exceptions. If a person has a nationality which is different from his or her place of habitual residence, the law of the country of such nationality can be chosen to apply to the deceased’s succession.
The Regulation can have a significant impact on Canadians with ties to EU member states, including for:
The short case study below illustrates how the Regulation can affect Canadians and their estate planning, specifically highlighting the case of a Canadian citizen resident in a participating EU member state.
Harry was born and raised in France. He moved to Ontario seeking employment opportunities and eventually became a Canadian citizen. He always planned to move back to France when he retired. Harry started a successful business, built up significant wealth, and became a well-known philanthropist in the community.
Harry has now retired to the south of France and is renting a beautiful property. Sadly, his wife has passed, but his children and many grandchildren visit often. He sold his home in Toronto but has retained a large investment portfolio in Ontario and has a few bank accounts in France.
Harry has not updated his will which he prepared many years ago in Ontario, and thinks it would be prudent to seek legal advice now that he is residing in France to see if this impacts his estate plan. He and his wife were charitably minded and envisioned leaving a significant portion of their combined wealth to various charities on the death of the survivor, in addition to passing on some of their wealth to their children. Under his current will, his estate is to pass to his wife, or if she has predeceased him, then 50% of his estate is to be divided among his children and 50% of his estate is to be divided among various charities. He wants to maintain this distribution and honour the wishes of his late wife.
Is Harry restricted in any way from carrying out his intentions?
Harry is currently living in France, a civil law jurisdiction with a forced heirship regime.
Under French law, the amount of the forced heirship portion varies according to the number of children who survive the deceased. If there are three or more surviving children, 75% of the estate must pass to them. A person is otherwise free to dispose of the remaining 25% as he or she chooses.
Given Harry’s Canadian citizenship and French residency, we must consider what law governs the succession of Harry’s property on death.
Under the Regulation, Harry can choose the laws of Canada, and specifically the laws of Ontario as the jurisdiction in which he has the closest connection, to govern succession to his property under his will, and thereby avoid the forced heirship rules in France.
Under his will, after having chosen the law of Ontario to govern, Harry is free to leave all of his assets as he wishes as opposed to only having this freedom with respect to 25% of his assets. He can choose to leave 50% of his estate to his children and the other 50% to various charities. He is able to make this choice of law under his will because France has adopted the Regulation and because he is a Canadian citizen.
The result would be different if Harry does not choose the law of Ontario to govern the succession of his property. To determine which law would govern succession to Harry’s assets, we would look at his last habitual residence, which is France. French succession law would govern Harry’s worldwide assets, which would include his bank accounts in France and his large investment portfolio in Toronto (if Harry retained his home in Toronto or had any real estate in Ontario, succession of the real property would be governed by Ontario law).
In addition to this choice of law, Harry may also want to consider having one will to govern all of his property or an Ontario will and a French will to govern the property in each respective jurisdiction, which may allow for a more efficient administration of the estate. Careful attention would need to be paid to ensure that these wills operate concurrently and don’t accidently revoke each other.
About the Author
Marly Peikes is an associate lawyer at O’Sullivan Estate Lawyers LLP. Marly’s practice includes all aspects of estate and trust planning, estate administration and estate dispute resolution. Marly advises domestic and international clients with Canadian connections on estate administration tax planning, income tax minimization and deferral strategies, family business succession planning and philanthropic planning. Marly is currently completing the Diploma Program of the Society of Trust and Estate Practitioners (STEP).